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Quasi-Reorganization

What is 'Quasi-Reorganization'

A relatively obscure provision under U.S. GAAP which provides that under certain circumstances, a firm may eliminate a deficit in its retained earnings account by restating assets, liabilities and equity in a manner similar to a bankruptcy. A firm's stockholders must agree to allow the accounting change, which essentially resets the firm's books as though a new company had incurred the assets and liabilities of the old firm.

Explaining 'Quasi-Reorganization'

Although the idea of quasi-reorganization has seen some renewed interest, the provision is still rarely applied in practice. The idea of quasi-reorganization holds appeal for some as the idea of a "fresh start" is more exciting to investors than slowly digging out from a large deficit of retained earnings. Some also argue that quasi-reorganization could be an effective method of more accurately resetting the accounting balances of a firm when a serious drop in asset values is not adequately reflected. Quasi-reorganization remains highly controversial, however, since it is not truly a change of economic reality, but rather a method to make books appear more favorable.


Further Reading


Asset revaluation and cost basis: Capital revaluation in corporate financial reports
www.jstor.org [PDF]
… The concept of quasi-reorganization then was developed to ensure that the capital revaluation was undertaken … regulations or norms, those that are com- patible with their particular economic, social, and … that there was a net write-up of intangible assets for the whole economy …

Quasi reorganization and current value accounting in thrift industryQuasi reorganization and current value accounting in thrift industry
search.proquest.com [PDF]
… The concept of quasi-reorganization then was developed to ensure that the capital revaluation was undertaken … regulations or norms, those that are com- patible with their particular economic, social, and … that there was a net write-up of intangible assets for the whole economy …

Quasi-Reorganizations in ReverseQuasi-Reorganizations in Reverse
www.jstor.org [PDF]
… The concept of quasi-reorganization then was developed to ensure that the capital revaluation was undertaken … regulations or norms, those that are com- patible with their particular economic, social, and … that there was a net write-up of intangible assets for the whole economy …

How to avoid bankruptcyHow to avoid bankruptcy
search.proquest.com [PDF]
… The concept of quasi-reorganization then was developed to ensure that the capital revaluation was undertaken … regulations or norms, those that are com- patible with their particular economic, social, and … that there was a net write-up of intangible assets for the whole economy …

Financial Reporting And Auditors' Opinions On Voluntary LiqFinancial Reporting And Auditors' Opinions On Voluntary Liq
search.proquest.com [PDF]
… The concept of quasi-reorganization then was developed to ensure that the capital revaluation was undertaken … regulations or norms, those that are com- patible with their particular economic, social, and … that there was a net write-up of intangible assets for the whole economy …

Quasi-reorganizationsQuasi-reorganizations
search.proquest.com [PDF]
… The concept of quasi-reorganization then was developed to ensure that the capital revaluation was undertaken … regulations or norms, those that are com- patible with their particular economic, social, and … that there was a net write-up of intangible assets for the whole economy …

ANALISIS PENILAIAN SAHAM PT. SIERAD PRODUCE TBK PASCAKUASI REORGANISASIANALISIS PENILAIAN SAHAM PT. SIERAD PRODUCE TBK PASCAKUASI REORGANISASI
repository.ugm.ac.id [PDF]
… The concept of quasi-reorganization then was developed to ensure that the capital revaluation was undertaken … regulations or norms, those that are com- patible with their particular economic, social, and … that there was a net write-up of intangible assets for the whole economy …



Q&A About Quasi-Reorganization


What is a quasi-reorganization?

A quasi-reorganization is an accounting method that allows a firm to restate its assets, liabilities and equity in order to eliminate a deficit in its retained earnings account.

Is this really like starting over from scratch or more like just changing how things look on paper?

This is really like starting over from scratch since there is no way to change what has actually happened economically without changing what has been reported on paper.

What happens if stockholders do not agree?

The firm cannot use the method.

How do you get rid of a deficit in your retained earnings account?

By restating assets, liabilities and equity.

If firms could choose whether or not to use this method, why doesn't everyone want to use it?

Some argue that it would be better for investors if firms did not have the option of using this method since it makes their financial statements appear better than they actually are by eliminating past losses without having any impact on future performance..

What does it mean when you reset your books as though a new company had incurred the assets and liabilities of the old firm?

It means that you start over with zero retained earnings.

Why does the article say that quasi-reorganizations are "relatively obscure"?

The article says that they are relatively obscure because they are rarely used.

Who must agree for this type of reorganization to occur?

Stockholders must agree.

Do firms ever choose to use this accounting method even though they don't need to ?

Yes, some firms have chosen to apply for permission even though they weren't required because it makes their financial statements appear better than they actually

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